MARKHAM, ON, Nov. 14 /CNW/ - Cygnal Technologies Corporation (TSX: CYN)
("Cygnal" or the "Company") today announced that it is initiating a
court-supervised restructuring in order to restore its financial health.
The Company will seek an Order under the Companies' Creditors Arrangement
Act ("CCAA") in a hearing before the Ontario Superior Court of Justice this
morning. The Order being sought, if granted, will cover Cygnal Technologies
Corporation and its subsidiaries Cygnal Technologies Ltd. and Accord
Communications Ltd. The Order will not cover White Radio GP Inc. or White
Radio LP, neither of which is participating in this process.
The Company's Chief Executive Officer, Jos Wintermans, said, "We are
taking this action to address our problems, protect our stakeholders, develop
a restructuring plan, and return to being a financially viable business. A
thorough financial review has concluded that we face a serious viability
issue. Our problems include a high level of indebtedness which bears interest
at a high annual rate, a high cost structure, a deteriorating cash position
and a lack of access to the funding required to maintain our operations.
Although Cygnal has begun to implement several cost control measures, Cygnal
does not and will not have the liquidity that it requires without the legal
protection and other benefits provided by a Court-supervised restructuring
process. We believe that today's action is the responsible course to take and
that we must act quickly in order to preserve the cash we require for our
operations and to maintain the viability of those operations. The Order being
sought, if granted, will provide the process and the legal protection in which
we can operate without interruption and serve our customers throughout this
period. We believe that a successful restructuring will achieve greater
benefit for our stakeholders than any other available alternative. However, it
is not possible at this time to predict the final details of the restructuring
plan that will be presented to our stakeholders for their approval or to
speculate upon any other actions that might be taken in connection with this
process."
In order to provide Cygnal with access to the funds needed to conduct its
business during this period, the Company's existing lender, Laurus Master
Fund, Ltd. ("Laurus"), will, upon the Order being granted, make available to
Cygnal a further $7,415,000 in the form of "debtor-in-possession" financing.
In addition, Laurus will maintain Cygnal's current operating credit
facilities, although Cygnal will not be entitled to additional advances under
those facilities. The additional financing is expected to provide Cygnal with
adequate liquidity to fund its on-going operations while the Company pursues
its restructuring plan.
If granted, the Order being sought will stay obligations of the Company
to creditors (other than Laurus), including suppliers, for the customary
initial period of 30 days. The stay period may be extended upon subsequent
applications to the Court. The Company will pay suppliers for goods and
services provided after the date of the Order being sought. Claims prior to
such Order will be addressed in the restructuring plan.
Under the terms of the Order sought, if granted, Laurus will be
unaffected by the Order and will be entitled to demand payment of advances
under the debtor-in-possession facility and all other secured indebtedness of
Cygnal owing to Laurus upon notice to Cygnal following the occurrence of
certain stated events of default. Laurus has given notice to the Company that
certain events of default have occurred under the existing loan agreements
between the Company and Laurus and has accelerated the payment of all of the
Company's obligations under these loan agreements and the related security.
However, pursuant to a forbearance agreement between Laurus, the Company and
certain of the Company's subsidiaries, Laurus has agreed that, for so long as
no further events of default have occurred (other than any defaults arising as
a result of the Company and its subsidiaries having sought court protection),
Laurus will not take any further steps to enforce its rights under its
existing loan agreements with Cygnal or in connection with any existing
security or guarantees granted by Cygnal or its subsidiaries in favour of
Laurus.
The Company intends to continue its efforts to solicit proposals from
third parties for an alternative transaction, including a sale of the Company
or all or substantially all of its assets or business. There can be no
assurance that those efforts will be successful.
If the Order being sought is granted, PricewaterhouseCoopers Inc. will
serve as the court-appointed Monitor under the CCAA process and will assist
the Company in formulating its restructuring plan.
About Cygnal
Cygnal is in the business of providing network communications solutions
including the design, integration, installation, maintenance and management of
wired and wireless solutions and networks. The Company offers a full range of
technologies and solutions for service providers and enterprise customers.
Cygnal has expertise in voice, video and data solutions over traditional and
next generation converged technologies.
Cygnal Technologies Corporation is headquartered in Markham, Ontario and
supports end-user customers and business partners through 12 offices across
Canada, including Vancouver, Edmonton, Calgary, Winnipeg, London, Burlington,
Toronto, Ottawa, Montreal, Quebec City and Halifax.
This news release contains forward-looking information with respect to
the Company's business, operations, financial performance, conditions and
outlook. Actual results may differ from expected results for a variety of
reasons, including the proposed restructuring announced today and the factors
discussed in the Company's most recently filed Management's Discussion and
Analysis and other continuous disclosure documents filed by the Company with
Canadian securities regulatory authorities.
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